Boston, MA 06/20/2014 (wallstreetpr) – Medtronic, Inc. (NYSE:MDT) is raising an unsecured bridge loan of $16.3 billion in order to finance the acquisition of Covidien Plc worth $42.9 billion. The information was given on June 17, 2014 by a senior banker of Bank of America Merrill Lynch (BoAML), who is working closely with the deal. Medtronic on June 15, 2014 had agreed to buy Covidien and relocate its executive headquarters to Ireland in an attempt to enjoy the autonomy of the lower corporate tax rates, a privilege given to the U.S. firms if they establish their business abroad.
Initial Book-Runner of the Deal: Bank of America Merrill Lynch
The Bank of America Merrill Lynch (BoAML) as of now is the sole and initial book-runner of this deal. The loan of $16.3 billion would become the biggest loan underwriting commitments of BoAML in the history of its business. BoAML is not just the sole book-runner but also the only lead arranger of this deal.
It is interesting to see that the $16.3 billion sole underwriting of The Bank of America Merrill Lynch is higher than its own $15.25 billion share of the $61 billion bridge loan which was used to assist Verizon’s acquisition of Verizon Wireless in 2013. The Verizon deal was underwritten by four different banks.
BoAML was the sole underwriter in the $4 billion loan for ABB’s acquisition of Thomas & Betts in the year 2012.
Huge sole underwriting: A Reflection of Confidence in Liquid Debt Markets
The bankers following this deal closely believe that the sole underwriting of this stature by a bank reflects the assurance in the markets of liquid debts, which is now giving wings to the hopes of M&A renaissance. The credit markets are being strong at the moment and this gives reassurance on ability to syndicate risks is the situation comes.
Two Tranches Structuring of the Deal
The structuring of the deal has been done in two tranches. The first one will be the bridge loan that will be used for bond issues that will be issued quickly and the second one will be the bridge loan to cash that will enable Medtronic, Inc. (NYSE:MDT) to get the finance from various parts of the company’s own ventures. However, it has not been made clear if either of these tranches shall be syndicated or not.
